tv Closing Bell CNBC March 5, 2015 3:00pm-5:01pm EST
atching and we'll all be watching at 4:00 when the "closing bell" has the inimitable mark cuban, owner of the dallas mavericks, a shark among sharks. thanks, everybody, for watching "power lunch" today. for more one you can find more cnbc.com. "closing bell" starts in three, two, one -- now. and welcome to the "closing bell," everybody. i'm kelly evans down here at the new york stock exchange. >> i thought we were at the north pole. >> feels like that outside. >> sure does. i'm bill griffeth. a snowy day in the northeast again. much of the nation, of course, we are watching a market trying to stay in the green after two consecutive down days after the nasdaq allegedly closed above 5,000 on monday. which i still won't believe. >> it will be real if it happens when you're here. see if it has more staying power that time. >> we're continuing to track the developing story out of laguardia airport, northeast of here, a plane skid off the
runway in that snowstorm. we have the very latest on that situation. 16 people injured, two taken out on stretchers. now, billionaire mark cuban making waves today, publishing a blog saying we are in a tech bubble that is quote, worse than the one 15 years ago. cuban will join us exclusively about an hour from now for more detail on this provocative thesis, bill making the rounds today. don't miss it. >> one of the real -- you can't even call mark a survivor of the dotcom boom -- >> a thriver. >> he was a winner. he created broadcast.com and and sold it for billions before the dotcom bust came and he's been playing ever since. >> that's why we'll be interested to see what he has to say about the cycle this time around and who stands to be helped or hurt. >> always outspoken. >> later, banks stressing out. literally, the government releasing the latest results on those stress tests for the banks, whether they prove -- they could withstand an economic meltdown again. we'll have those results the
moment that they are available. a lot of implications to this very important story. so stick around for that coming up at the top of the next hour. >> stress tests have proven to be volatile for a lot of these financial companies the last couple times around. we've got that to keep an eye on. marks rallying into that and the payroll report that we will get 8:30 a.m. eastern tomorrow morning. we should mention, the snowstorm bearing down on d.c. and that could potentially have an impact on the release of that report. we'll see. here's where we stand. 25 points higher on the dow right now. s&p edging higher by a point or two, lugging that 2,100 mark. and the nasdaq up 14 49.81 this hour. >> let's get to our "closing bell" exchange. with us today, we have rob morgan from sefia financial. kenny p. is here at big board. so is ralph siegel. jim lowell from adviser investments. and all is well with the world. he's got a bow tie on again. and rick santelli joins us from chicago.
kenny p. is this a snowstorm market? i mean the market has really just kind of me andered today. what's going on? >> we had two or three days where the market's been under a little bit of pressure trying to find some footing, which it did yesterday, and now it's been kind of churning. good news out of the ecb, good news out of europe and the back of demand. we have nonforeign payrolls tomorrow, which i think everyone is expecting will be in line no surprises either way to the up or downside. and therefore the markets just kind of catch up with itself. there's no real volume today. that might be partly attributable to the weather, although i doubt it. i just think it's kind of like the market just digesting what it's gone through. >> by the way, they're expecting somewhere between 235 and 240,000 jobs created for last month. month. they've got lofty expectations. >> what's your expectation, rob and what did you make of that
shockingly low productivity number. >> the numbers weren't great. i'm hopeful nonforeign payrolls will be in line tomorrow but i'll tell you what with february so cold it wouldn't surprise me if we see a slight downward surprise on nonforeign payrolls. >> you certainly saw that in the beige book report. the weather taking its toll on retail in parts of boston and new york. i mean you would imagine that employment is going to take a hit there as well. jim lowell kelly and i were marveling at a statistic that came our way this afternoon what our friends at every court ed showing that money flows in mutual funds so far this year that investors have taken $13 billion out of equity funds so far this year and they've put $39 billion into bond funds this year. so far. what do you make of that? >> i think investors remain very cautious. the psychological feeling is one
that the markets gains can be pulled out from underneath them at any moment despite the fact for six years now, we've been able to climb that kind of wall of worry. i do think that there's also as the investing public ages there's definitely a trend towards asset allocation that favors at least an ongoing push into asset classes on the income side despite the fact that the return on those investments is anemic at best. i also think we started january off on a fairly weak foot that probably made people a little bit nervous, especially after last year's gains. all that said and done, i continue to like u.s. equities and the european across those boards, as well as japan, and in particular, japan's smaller and mid-kaep mid-cap companies. this kind of uncertainty investment wise creates opportunity. >> ralph, let's talk about europe. what did you make of the european central bank's meetings, mario gragdraghi's remarks here. the way euro has plummeted.
and yet yields keep moving lower. ralph, what do you do with europe here and what does it mean for the u.s.? >> it seems to us that what the europeans are doing is part of a global race to the bottom in terms of trying to devalue their currencies and gain an edge for their export markets. it will be matched, i would suspect, by the japanese if their economy starts to falter it will be managed by the chinese, if weakness continues there. it's going to make it a lot harder for u.s. companies who are facing -- who export to have to face their competition. a race to the bottom didn't work in the '30s and these efforts right now don't inspire us either. this is a slow-growing global economy. >> i think rick santelli you would agree with that. we've given you a lot to work with here rick. whether it's the money flows, strength of the dollar the expectations for job growth. what's caught your attention today, so far? >> all of it.
let's buckle up and take a big walk around the block. i was very bugged by the ongoing drop in productivity. that is not a good sign. we talk about the euro and it has been a big move but it's a drip, drip. you know, think about the kind of moves we had in energy. we're not seeing those moves. we're not seeing those moves in the euro. and that is very enlightening. you know, when you look at the list of the types of securities that are going to buy, there's so many asterisks in the announcement today. and part of that list includes these international entities like the nordick investment bank, the council of economic development. there's a real short animalageshortage. when we talk about these etf flows, an etf is not a real piece of paper in the traditional sense of a security. the security pace there's very little float there. central banks are going to have a hard time buying at the pace. and world issuance is a real factor there. that's going to come back to haunt us a bit.
and you hear the whisper growth numbers out of china. this is making me a little bit nervous. we can look at the markets in their entirety. we're still doing better than everyone else. but sometimes we have to ask, better than their neighbor weaker than export. but who's going to be around the globe to do all the buying is the question i want to ask. >> ralph, can i go back to this begger thy neighbor point, why can't we look at europe or any of these companies in isolation and say for their own interior domestic economy, they're trying to do the best thing here? >> that's exactly the tact that they're taking kelly. they're saying, we can -- this is the only way we can grow our way out of this. and if i were in their shoes, i would be trying it too. the trouble is each and every other central banker will be saying the same thing about his or her own country, and the result is it's a spiral down. >> but if these economies are individually somewhat weak and the central banks are responding to that, yes, the currencies are moving around but it's not
necessarily because they're using the currency as the tool itself. does that make any difference to you? >> as practical matter, at the end of the day if the real concern is the absence of global growth, no. >> okay. >> there's been a feeling, rob morgan, that with quantitative easing dawning in europe that the markets there will respond, the equity markets will respond a lot the way our markets did over the last five years. and yes, you still don't like international equities. why? >> well bill it's from the standpoint of the fact that the dollar is going to continue to edge up here for all the factors we've talked about, with the euro and the yen, continuing to weaken. so, for u.s. investors holding international stocks that's a major headwind. the same for big multi-national u.s. companies. that's why u.s. investors should also invest in small cap. it's mainly buff the rising dollar. >> rick, at the same time, the huge story of the year is corporate debt. the issuance is massive. it's coming by the way, from all over the energy space and
extending a lifeline to the big guys, the small guys and everybody around the board. what do you make of the enormous demand here for credit across the corporate space? >> you know i'll tell you, i understand the issues of energy i get it. but i wouldn't be nearly as worried about the energy corporate space as i would just the corporate space in general. you know, we have overseas companies now issuing zero coupon corporate debt. you have all the good financial assets with respect to securities being gobbled up faster than issuances by central banks. that means everybody else in the investment space has to buy the other stuff, which a lot of it's going to be corporate. and corporations like warren buffett, they're smart to do this. to go to those low interest rates and euro denominated space. but i worry about the liquidity. should equities have a hiccup especially in the high yield, i just don't know where the liquidity is going to come from. you know when i look at the trading floor, the people that service our money makers in all of these different sectors those numbers are much smaller
than last year, and significantly smaller than before the crisis. >> kenny p. we started with you and we'll finish with you. what are you expecting as we go through the close here? and how do you expect the markets to respond tomorrow? we do have this sense that maybe the weather will take a bit of a toll on the jobs numbers for february. what do you think? >> right, but even remember so that's just a temporary -- it's temporary, right? if it's a weather-related issue, we'll see a bounce back in that. i don't expect -- even if the numbers are little bit weaker than 235, it's not going to be a disaster by any stretch. i think today at the end of the day, the market just churns right here. it's fighting with 2,100 on the s&p. i think it wants to hold that going into the bell. and i think tomorrow you'll see the market kind of react positively after we get that news. unless it really disappoints and i'm not seeing it to the downside, i fully expect that they'll discount any weakness because it's temporary, and then the market will start to move higher. >> all right. very good, folks. thank you all. >> appreciate it. 50 minutes left in the trading session here.
48 1/2, if you want to really be precise about all of this and we do like to be precise here. up 24 point ossen the dow. the s&p hold right at 2,100, wouldn't you know, and the nasdaq is up 14. >> it's back below 5,000, but it's still been the talk all week. coming up, billionaire investor mark cuban warning, we are in a tech bubble worse than the one in 2000. he'll explain why in an interview you won't see anywhere else here today. >> really looking forward to that also when we come back. this was plain scary. after a delta jetliner skid off the runway at new york's la guardier airport. we'll have the latest developments and tell you what you need to know about airline safety, coming up. can it make a dentist appointment when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time?
welcome back. morgan brennan is covering today's movers. >> dunkin brands shares will moving after goldman sachs upgraded the company from buy to neutral citing an increase in sales, better results from the company's loyalty program, and an expected earnings increase from its new k-cup distribution deal. you can see those shares are up 3.5% right now. next up two solar stocks that are both soaring.
vivint solar, that's popping about 32% right now after posting better than expected earnings. also canadian solar. that stock's up about 14% right now. now, that stock did post an earnings miss but gave upbeat current quarter guidance and also announced plans to form a yield co for some of its assets. finally, vertex pharmaceuticals. the "financial times" reporting that the company could be close to getting fda approval for its cystic fibrosis treatment. shares of vertex are up 5%. back over to you. >> morgan thank you very much. a scary event out at new york's laguardia airport today after a plane skid off the runway in very ugly weather. >> our sue herrera joins us with the latest developments. >> we now have one runway reopened but the delta airlines jetliner with 127 passengers and five crew members on board did, indeed skid off the runway during its landing at laguardia airport. they were flying in from atlanta
and landed on runway 13. the incident happened at about 11:00 a.m. eastern time. passengers as you can see, evacuated safely. luckily, no serious injuries. two people were transported to the hospital. that's according to officials. the cause of the accident is still unknown. the ntsb will be investigating, of course, that crash. but during a news conference a bit earlier, a port authority official said that before the incident there were two planes that reported a good braking on the runway and that runway was plowed shortly before the incident. however, this is how close it was. take a look at some pretty dramatic images showing the tip of that plane perched over the water after it crashed through the gate. and incidentally, with port authority officials giving some high praise to the pilot, that they were able to keep the plane from going into the river. we all remember that 1982 incident with us airways, where that was not the case and some 27 people died. we will be monitoring this developing news story and bring you the very latest updates as
they become available to us. but once again, bill one of the runways at about 2:00 p.m. eastern time was reopened. >> that is earlier than anticipated. >> absolutely. >> good news at this point. thank you, sue. so a lot of people are asking now as a result of this why were planes even landing at laguardia in the mist of this kind of weather? it's bad outside still. and those runways at laguardia are especially notoriously short and they feed right into flushing meadow bay. they can be very slippery at this time. >> you were saying you don't even like to fly in and out of laguardia on a regular day because of that. >> i did. >> joining me now is michael boyd, an aviation expert from the boyd group, and ntsb investigator. greg fife, welcome to you both. michael, is this an issue specific to laguardia or would have concerns about planes taking off and landing in this kind of weather anywhere? >> i don't have concerns because the pilot and command thought it was safe. the airport thought it was safe so those are the decisions of the people we rely upon. i wouldn't go down upon the path
saying they shouldn't have been landing there. airplanes before this landed safely, so therefore, i think we're looking at something other than a bad decision made by someone on the ground. >> greg are there ntsb guidelines on when an airport should close and so forth based on weather? >> the ntsb doesn't have any regulatory authority. it's up to the airport to determine whether or not the runways are in a condition for safe operation. they'll coordinate that activity with the faa, but it is the airport's call to go out there and determine whether or not the runways are in a condition for safe operation. >> greg it does appear according to the faa's own statistics, that runway incursions are on the up. we had memorably this week or last week united sending a note internally to its pilots talking about the need to improve some of their safety regulations -- some of their safety practices. is all of this of a piece here or would it be jumping toings say there could be a looming safety
problem in the air space industry? >> i think that's going just a little too far this early. we don't really know all the facts, conditions and circumstances. one of the things that of course, the ntsb with and faa will be looking at is the operation of the airplane. that is, how the crew made the decision to land what their decisions were once they landed and then were there any mechanical malfunctions or failure with the aircraft that may have caused or contributed to the loss of control by the crew. so there's a lot of investigative work yet to be done. and then looking at it in total, they'll be looking at the airport, looking at the surface conditions, of course, the previous braking reports. so there's still a lot of investigation before we start tying this to any kind of safety issue at laguardia. >> but michael, we know safety is job one. that's what -- that's paramount to anybody in the airline industry. but we all know the tristate area here where we got three major airports newark we've got jfk, and laguardia, there's tremendous traffic and there's
pressure and it's been a lousy winter and airlines have had to cancel all kinds of flights because of the weather, so is there some pressure then to keep the planes in the air because the -- we've had such a bad winter anyway? you know what i mean? >> all those things are non sequitur s to what happened today. an airplane touched down on a runway skidded past the end of the runway. that's what we know today. but what we also know today, which is rarely mentioned is is how safe the system is how quickly the port authority got out, up there, and also how the port authority was totally on top of this beginning to end. look at that press conference. i'm -- when it comes to safety right now, i feel a lot better than i might have yesterday. >> michael, just to go back to the numbers here 2014 over 1,200 runway incursion, the faa is reporting. 2010 there were 900. that's a significant increase. about a 30% increase over a four or five-year period here. are you denying that there's been an increase in runway incursions? >> no we're not talking about
runway incursions. we're talking about an airplane that landed on a runway that was covered in snow. those are just the runway incursions that we know about. we don't know about all of them. i don't have a lot of faith in the faa reporting those. but that's aarate thing than what happened today. >> what's your thought about the pressure on the industry to keep those planes flying, since the airlines have had such a bad winter anyway? >> i think that's a perception. the airlines are not going to put any person whether it's their flight crew or passengers in a position of jeopardy. the fact that the airplane landed on this runway and did go off the side that is a safety issue that's going to be developed through the investigative process. but if laguardia really thought or the port authority really thought that laguardia were unsafe, they would have shut the airport down and changed the runways. they wouldn't have allowed airplanes to continue. and again, it's a system that works. and as michael say, it is a very
safe system. this is an anomaly happened today. they're going to have to find out way. >> greg a final question. do you ever hesitate when flying in or out of laguardia, winter or otherwise? >> i fly into laguardia quite a bit. i have all the confidence in the world in the system and in the airlines i'm flying on. so i don't have a problem flying into laguardia. >> michael, same question to you? >> oh, i'm biased. my father worked at laguardia, i started my career at laguardia, i love laguardia airport. it's my preferred airport for the new york area and i feel very safe there. >> all right. gentleman, thanks. >> very good. >> i'll be the bad guy on this one. they are short runways though. we've got 37 minutes left in the trade session here. the dow is up 34 points. this is kind of a wait-and-see market right now. you can tell. we'll wait to see what the jobs number is tomorrow morning. maybe that will bring the volatility back. we haven't seen much this week after nasdaq 5,000 on monday. >> and can't wait to see what billionaire mark cuban has to say.
he's sending investors a wake-up call today, saying we're in a tech bubble worse than the one 15 years ago and he'll tell us in an exclusive interview, coming up. and a hedge fund pro gives us her reaction to a new study showing more women will make up tomorrow's millionaires. her firm as it happens, boasts that they're one of the largest managers of pure play women and minority-owned firms in the country. don't miss it, coming up after this. there's nothing more romantic than a spontaneous moment. so why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure.
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move over men. more women are on track to make millions. a new fidelity study finding that more women on track to become millionaires these days bill. >> i believe that. and it should be no surprise to our next guest. she is roxane martinez she's chief executive of aurora investment management. they are one of the largest managers of pure play women and minority-owned firms. roxane, good to see you. thank you for joining us today. >> thank you for having me. >> the statistic that jumped out to me 68% of so-called emerging affluent investors, 68% are women, whereas 40% of those who are current millionaires. i mean they're on their way, aren't they? we're seeing a sea change in the demographic makeup of investors out there, aren't we? >> i think we are. and i think part of that is that, i think entrepreneurial spirit is growing, both in men and women, but certainly, we see
it in women. where women are thinking of businesses they want to start, they want to lead and are going out there, getting often advanced degrees, and then starting these companies. and so i think when you are an entrepreneur, and you start your own company, you do reap the benefits of that. and that's what's showing up. >> roxane what typically are these people looking for, these women? is it to protect their wealth to increase it? i mean, how do their preferences differ from the average, or, i guess, the typical male-driven investment environment? >> um i don't think that it would be that different. although, i think women recognize diversification as being a primary ingredient on retaining wealth. but i think men probably also realize that. certainly, i think not putting all your eggs in one basket is a concept that is understood by women and they look for diverse investments. >> yeah, i mean i've always
heard, women make better money managers, women don't take unnecessary risks the way men do. there's sort of a macho thing. we're generalizing here but that -- there is some validity to that isn't there? >> well and the good news is i think that people are paying attention to these concepts and including women in more groups. we certainly see a lot of studies being done now that weren't done before on diversity in decision-making groups. and that having diverse outlooks or diverse views of things creates a decision-making body that probably is more robust meaning in investments, a lot of things can happen. so the more robust your view of what can happen in the future gives you a much better portfolio structure. much more stable and much more versatile. >> roxane, what about your recruiting? do you run into trouble finding enough people to populate your
firm? are you frustrated the university isn't larger? or do you think that's all now starting to change? >> i think one of the ways to increase the number of women and investing is to increase the number of internships that are offered to women. internships is a great way to take a look at someone very early in their career and it's something that we use very successfully within the firm. and so i would encourage people to develop an internship program in investing, and then to pay attention about the ratios as you offer those internships, and then take a look at all of the interns that you have and select the best. i think it will give women a much better shot at entering into the investment field. and of course a lot of studies have been done on the higher levels of management senior management, board levels ceo levels, with women. but if we don't have that class coming in at all times, those
women won't have the experience to rise to the top. >> roxane good stuff. you know i can hear my daughter now saying she looks forward to the day when we don't have a conversation about the difference between men and women investors, we just talk about investors. >> right. right. >> and parody would be lovely with wouldn't it? >> wouldn't it though? thanks very much for joining us today. >> thank you. >> that's roxane martino. >> and i mentioned before, the number that jumped out at me 51% of current millionaires are retired. >> that seems like a high number to you? >> a very high number. more than half of all millionaires are retired now? that's crazy. >> but a lot were created during the baby boomer area and we have 11,000 people retiring a day. >> is that right? >> makes an impact. >> i guess. >> much more to come on closing bell. some are worried tomorrow's jobs report might disappoint. >> first, here's sue herrera with a cnbc business news update this hour. sue? >> bill, if i was a millionaire, i think i'd retire too. here's what's happening at this hour. 3m corporation says it will take
new steps to ensure that its suppliers of paper, pulp and other packaging provide materials that come from sustainablely logged timber. the new paper sourcing policy comes after pressure on 3m from environmental activists. exxonmobil has agreed to pay new jersey $225 million to settle a long-standing lawsuit over environmental damage from its refinery operations and service stations. a new study led by researchers at temple university reveals a commonly prescribed antidepressant could also help heal damaged hearts. the drug is paxel and it was able to block a protein that builds up in patients with heart disease. the company that sells the snuggy, the perfect bacon bowl and other seen on tv products has agreed to pay $8 million to settle charges from the ftc that it deceived customers. all-star marketing group promised customers a buy one, get one free promotion, but was still charging for the items in the form of high shipping and handling costs. and that's the cnbc news update at this hour. "closing bell" returns after a quick break. a great opportunity for an upgrade.
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you mentioned that earlier and it has not budged from that number there. and the nasdaq is up 12 points. we want to look at where the strength lies today, in the heat map for the nasdaq. this is one of those days when you know utilities are leading the way. >> and apple, by the way, is pretty much in the bottom right-hand corner there. one of the biggest laggards in the session. in fact, trip adviser, as well intel under pressure. so a lot of different names here in the red. tomorrow, we get the jobs report from february. the consensus estimates are for 240,000 new jobs and the unemployment rate to drop another tick to 5.6%. let's see now what our experts have to say about that. >> here they are. mark hemrick, and greg ip chief economics can commentator at "the wall street journal" and a cnbc contributor. mark you surveyed 25 for their predictions on the economy and two-thirds say they see unemployment going higher and oil prices going lower. >> we took the survey and the
economists are fairly upbeat on the outlook for the u.s. economy. they see the unemployment rate ticking down to 2.5% over the next year. they see average monthly job gains moving up to to 240,000 a month. and in terms of volatility in the financial markets, the majority of the economists surveyed do see volatility picking up over the next year. >> greg let's talk about some of the factors that are impacting the number tomorrow. temporary ones like the weather and the port strike perhaps more lasting ones like what's going on in the oil patch. >> the oil patch doesn't employ a lot of people so even with the pain they're going through right now, that's not going to move the number very much. the weather, an important factor, the port strikes. if you look at jobless claims data, we've seen what looks like an inflection point withed a most weakening trend for the last month or two. so i'm wondering whether this streak of accelerating job gains is over. i wouldn't be surprised if we had a downside miss tomorrow. but i think the point we want to
emphasize, as long as that number is over 100 to 150,000, you're still chipping away at the slack in the labor market. and you're still on track to the fed, distinction to raise rates. . >> greg janet yellen spends it seems to me more time talking about inflation expectations than she does about job growth. is inflation more important to the fed than the number we're going to get tomorrow? >> yes, but the two are related, remember. if the unemployment rate drops to 5.6% and that gives them more comfort at that point when inflationary inflationary pressures start to push inflation up again, that will rise. the absolutely key aspect you want to look at is a wage number. we had a # o.5% pop in january. if that is continued in february, even 0.3% i think that really makes the fed more comfortable that their baseline scenario of what the world is supposed to look like is coming true. >> and mark when we talk about when the fed is going to move what do you see in the numbers out there? >> absolutely. our bank rate economic indicator survey really had the majority
of the economists almost all of them saying that they do see the fed raising rates in 2015. and no big surprise this is where they've been over the course of the last year. >> they see it happening in june, mark. that's very early compared to the prevailing wisdom out there right now. >> well indeed. and to the prevailing wisdom hasn't always been so wise, has it, bill? so we'll continue to see what happens here. 40% do see the fed raising rates in june as you say. >> greg could it be one of those where one and done and then they wait for a while, if they raise a rate in june, just to put their toe in the water. what do you think? >> i think that's a very good s scenario, bill. i think one of the regrets they had from the last cycle from 2004 to 2006 was this met ro nomic quarter point every single meeting. i think that number one, they would like to be not so predictable, because they think predictability might make the market a little bit more -- take a bit more excessive risk and leverage than they'd like. and number two, as my colleague,
john hilsenrath wrote in the journal on monday there's a view that the end point for the federal funds rate might be a lot lower these days than it has been in the past. maybe somewhere between 3 to 4% instead of 5%. and that suggests that you want to stretch the tightening process out over a number of years. and so you do not go every single meeting. >> greg what did you make of the terrible productivity number this morning? and what bearing does that have on the jobs number tomorrow? >> the terrible productivity numbers are of a piece. and this has been a very poor expansion in terms of productivity. frankly, it's the main reason why we've gotten good job growth against very lousy gdp growth. i think one thing it tells you is that it's putting upward pressure on wages, because unit labor costs, when you look at productivity adjusted wages, unit labor costs have been rising. this means that firms have limited room in their profit margins to keep accommodating higher wages, without eventually passing that through to prices. so another year or two of bad productivity data spells a bit of trouble on the inflation front.
>> last one. marc, from your survey the economists see the ten-year treasury going to 2.67%. here we go again. another forecast that long-range rates are going to go up and not down and they've been down for years now. >> there's that common wisdom. but i will know a year ago they brought down that forecast by about 50 basis points or so. so at least they're beginning to take, let's say, they're acknowledging the reality of the moment. >> real quick, mark and greg. if people tomorrow morning say, oh the headline is that the number missed but it was weather, do we believe it greg quality >> yeah, probably. i mean you won't be able to look at numbers like that because of the weather series that will give us a hit in that respect. but i will have a word of warning here. a year ago, there were a bunch of bad numbers that were eventually blamed on the weather, but we did hit a pothole. i would be cautious about writing it off as the weather. >> all you have to do is look behind you, greg. the capitol building is back
there somewhere, wasbut we can't see it. >> not a lot of jobs being created in washington, d.c. today. >> except for plowing. thanks guys. >> thanks. see you later. and new york looks just like that. you can't see. i came down the west side highway, i could not see the hudson. >> i couldn't believe how hard the snow was falling, truly. and it was a little unanticipated. >> it is march. enough already. oh sure we can see times square, there are enough lights out there, it's like daytime all day. crazy. 18 minutes left here in the trading session, as we head towards the close, the dow up 37 points. and mark cuban coming up in about half an hour. lots to discuss, including his blog post, warning we're in a tech bubble. he's just put up a part ii, by the way. he says this time it's worse than the one 15 years ago. >> coming out in parts now. up next, pass or fail? results from the fed's latest stress tests on banks. could royal shares of the
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under stress. 31 of the nation's largest banks have been tested once again by the fed to see how they would hold up to a recession or some kind of market shock. the financial stocks today have been mixed, as we await the results coming up. >> yeah they're due out in just a few moments. our morgan brennan joins us with a preview of what we can expect. hi morgan. >> hey, kelly and bill. while the fed's stress tests are supposed to highlight how well a bank's balance sheet could handle another crisis and how much extra cushion they'd have to pay out to shareholders. it's not pass/fail. so some banks learn that the hard way and are battening down the hatches after missteps. citigroup's plan was rejected outright. the bank spending all of 2014 trying to fix what the fed called, quote, qualitative issues. the ceo calling it priority one, two, and three, saying they spent $180 million on it alone. there's a spotlight on citigroup to pass this year.
the ceo says he should go if the bank fails again. bank of america had to scrap a buyback plan retroactively after discovering an error in its al collations. ubs analyst brennan hawking downgraded bac last week cautioning previous missteps and capital planning make him, quote, nervous about this year. nomura says bank of america is most exposed to regulatory risk. and finally, jpmorgan the largest bank of the group, needs more capital than its peers under new regulation it has 500 people working on this process alone. now, the others to watch, auto lenders, under scrutiny for subprime loans. regional banks that hold a lot of cdos. and foreign banks, many which are undergoing the test for the first time. "the wall street journal" reporting that deutsche bank are slated to fail. we'll be getting the results out after the bell at 4:30 eastern.
back over to you. >> all right. thanks for now, morgan. 13 minutes to go into the close. we're looking at the dow up 35. >> and art cashin just stopped by. $700 million to the buy side going into the close. so a little buying pressure coming in here with the dow up 35 points as we head toward the closing, about 12 minutes left. >> and mark cuban will be joining us next on the news line responding to this whole discussion he has started about this bubble in tech being worse than it was in 2000. we're back in two.
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welcome back. ever since the nasdaq retook that famous 5,000 mark on monday, most market watchers have been saying how the tech landscape is better and different this time around. but not our next guest. in a blog post last night, billionaire investor mark cuban explains why he says this tech bubble is worse than the one we had 15 years ago. >> quote, i have absolutely no doubt in my mind that most of these individual angels and crowd funders are currently underwater in their investments. i say "most." the percentage could be higher. why? because there is zero liquidity for any of those investments. none, zero. zip. that from mark cuban. >> and he's on the phone with us now in an exclusive interview.
mark, thank you so much for calling in for your time this afternoon. >> of course. >> boy you have set off a firestorm. >> i know! >> do you stand by what you had to say, though? >> oh, yeah absolutely. look, it comes down to this. you know, back then all the companies that were being hyped were public. and you could take a shot at it as an individual investor, but you had liquidity. if it went up too much you could sell and take a profit. if it went down you could sell and get some of your money back. today -- back then, everybody had an idea for a web page. today, how many times a week are you hit with an idea for an app? it happens all the time. there's more than a million apps. that'd today's equivalent. the problem with all these people investing in them and there's no liquidity. they have no chance of getting their money back but they think it's a smart investment because they think it could be the next twitter, the next whatever. >> right. ion, the comparisons is we're making back to the dotcom boom
are sort of apples to apples when we talk about the companies that were coming public at the nasdaq or even at the new york stock exchange but you seem to be suggesting that you're looking elsewhere for the companies where they're finding funding, whether it's crowd funding or whatever, and that's where you think the bubble is right now, that you say is worse than it was 15 years ago, is that the idea? >> right. so the big things about the bubble is people who really did not understand what they were doing. they were just going around with the crowd. today, you see the same thing in the private market, but all the individual investors are putting their money into apps. it's crazy, with no chance of getting their money back no liquidity, no upside whatever. without a hope of getting their money back. >> and we apologize to viewers, the connection we know isn't that great. but mark -- >> the information's great.
>> absolutely. and phil pearlman, on yahoo! finance said hey, look you're out of touch with america. this is nothing like the dotcom bubble saying there aren't as many people involved, as many retail investors who are going to get wiped out if it ends badly? >> i obviously don't agree with it. what i said to phil was, you know his mom has probably got hit up for money from the nice little boy down the street who has a great app idea. back then, it was a web page. now it's an app. same thing. back then small companies going public, raising $15 to 20 million. today, not even getting that opportunity. so there's not even that out there. so in reality, because of all these small investors, and i probably should have gone further, and i posted an update to my blog post i should have limited it to angels and crowd funding. i think that's where the data. but everything who gets pitched
an app. there's over a million in each app store. they're going to get crushed. and those people are getting crushed and not even realizing it because of liquidity and no multiples in the defiance of value in their investments. that's the definition of a horrendous bubble, when you make an investment, hoping it's going to be the next twitter, and then you don't have any liquidity whatsoever. >> right. but let me bring -- let me talk about then and now. you clearly were one of the symbols of victory in the dotcom boom in the '90s. you and broadcast.com. today, you've got the twitters the facebooks, the linkedins, those high-profile companies. how do they compare with what you guys were doing back in the '90s? let's talk about that kind of comparison, then. >> totally different because companies are coming out and going public much later. so we went public three years into our life and we were doing
our public -- i think we did $23 million in sales in so companies were coming out much earlier. now companies are going public much later, so you have a much longer operating history, so it's apples and oranges. it's not really comparable at all. >> but for that reason -- but for that reason doesn't that suggest that things are not as speculative as they were back in the '90s? >> oh, yeah look i'm not disagreeing. in the public market -- i understood in the public market that there's a bubble. i don't believe there is at all. but what i've said is that for private investors who were making small investments, thinking they're going to hit a grand slam just like we saw, you know, when broadcast.com went public at you know, priced at 18 and closed at 80 62.75, hitting a high of 72 that was a lot of little investors diving in hoping for a grand slam. we're seeing that same thing today in the private market.
the problem today and why it's worse is back then you had liquidity. but if you bought broadcast at 72 and freaked out, you could sell it. if you invest in twitter, you know, a clone and you don't feel good, you don't realize that you have no -- you've made a mistake. you have no liquidity. you're not going to know until they go out of business. to me that is far worse. lots of liquidity, lots of markets to define valuation. that's horrible for a smalltime investor. >> mark, i would love to hear your firsthand experience with this. can you give us some examples of apps or start-ups that you think are kind of ridiculous, have no business plan, no hope of really being a viable long-term, but you see other smaller investors lining up giving them funding -- >> oh, yeah! >> and contributing to this. can you give us some examples of that? >> oh, yeah. i got an e-mail today. so i have a typical approach right? so they'll tell me i have this app, all right? so send me a link. i'll download it look at it. i'll send a link back and say,
tell me the metrics on the deal. we have 60,000 monthly cave users. told me what he's looking for. this company has been in business six months. they've been in the store a few months. and i said, okay you're looking for 200 -- no he was liking for $1.5 million for 10% to have the company. and i said you know what that's crazy? he said, okay i understand mark, we have other people lined up. i'll give you another example. i've been invited multiple times to go speak to angel conferences where they're trying to educate more people to come in and be angels. now, don't argue about the fact i'm out of touch because there's a smaller number of angels and crowd funders. >> he was saying 1% or less. >> maybe i'm early. but when you compare them to the people who supply the technology, the hot technology ipos in 2000 and 1999 i think the numbers are going to turn out to be the same. i'll give you a third sample.
i came in pitching a crowd equity funding deal for real estate wanted $60,000. he had no idea what they were going to be buying no idea what the finances would turn out to be, but he said he had plenty of money available to them if we'd invest. >> mark we know how the dotcom boom busted. we know how that ended. and interestingly, there was no liquidity at that point. and inevitably nasdaq 5,000 was the peak and it went south. this time around how do you see it ending, if you're more concerned this time around than you were last time? >> well in the public market i don't think there's a problem. now just evaluate the company and make a decision. sometimes there's momentum traders that influence the valuation of the stock. but i don't think i've ever seen all these dying. on the flip side if you're a private investor and more than a million apps in the app store.
it's got to come from somewhere. i think there's risk. >> mark, we're taking a quick break to ring in the closing bell where lucius malfoy is ringing the bell at the nasdaq as well. mark cuban with us on the news line talking about the tech bubble today, versus 2000 mark. and if you can reiterate, bill was asking you, what happens this time around? how does it all end poorly? is there at much as stake, and for example, the investment boom that went sour and took the whole u.s. economy with it last time around in your view? >> no i don't think -- okay so there's two considerations here. one, in 2000 there was so much money invested in the anticipation of what the internet would do. you had fiber, infrastructure so much money being thrown at you, that when everything
delevered, obviously the whole country, the whole economy went to shambles. but the parts dwb the segment of that was the individual investor who lost a lot of their money. that's the analogy i'm creating. however, whatever the number is of individual investors who took buyers and dotcom stock, i think that number is approaching or will approach at some point in the near future investing in private start-ups like apps today. and the impact on those individuals could be worse, not on the overall economy, but on individual investors, because of the lack of liquidity, and the lack of understanding, what the market value is, until it's too late. >> mark, mike santoli. i want to just follow up with that. you know, we do see, in a small way, mutual fund companies saying, you know we have to get involved in the private investment boom. we have to sort of somehow participate in this silicon valley venture boom. does that at all have applicable
applicability to what you're talking about here? that small investments or firms catering to them feel like they have to have a hand in it? >> yeah so that is a symptom of a bigger problem. the bigger problem is that the ipo market or ipos under $80 million, with just a little bit of an exception for the biotech area, that market is down by like 80% since 1999. so what used to happen was, a company grew, you took in private investment and you didn't have to have a five or ten-year operating historying to public. you didn't have to have $100 million in sales to go public. a start-up like broadcast.com and many others could go public. now, that is dead. it is doa. and because of that two things are happening. one, there's not a place to invest in growth companies, the north carolina and facebook and
twitters of the world are going public. that's what leading a lot of these funds to try to invest in these vehicles. the problem is then it's too late more often than not as well. so to use broadcast.com as an analogy, we priced sold let's say $300 when we sold. so these guys are coming in when we go from a company to public now, they're at 280. when the big once get in to invest, they're at 220. that's the problem. they're not getting in where the smart money is in silicon valley. and there's not a lot of opportunities to coinvest with that smart money. that's the problem with bonds. we want the opportunity to invest in growth companies that are growing 100, 200, 300% per year because the fcc has just
crushed it. >> mark it's sharon epperson here. i'm wondering about the angel investors who are talking to you, who say they have money to invest and they're ready to do it now. whether they are doing it the smart way, the way that the angel resource institute says to do it. limiting their investments to 10% of their portfolio. perhaps spreading their risks by joining a syndicator or something where they can partner with many different people to do it? >> whati wish. >> what do you think is the best way to do it? >> i think you have to be very careful. that's where it's very analogous to being -- remember the old commercials? let's day trade. there were all kinds of warnings given back then and people ignored them because they saw the pot of gold at the end of the rainbow. angel investors are doing the same thing and now with crowd funding, it's going to create the perspective that it's even worse. now you can invest as little as
$5,000. so you might be thinking you know, instead of getting my car fixed, i'm going to put my $5,000 in and hit a home run. the next thing you know there's no liquidity and you can't fix your car when it brakes. i think it's going to end badly, and while organizations try to make people smart, greed takes over. people want to hit that grand slam, they think it will happen to them and that's where we make a mistake. i think that element, people because it's so much cheaper to start a technology company today. when we started broadcast, $5,000 the first day, but every day we had to have servers, had to have people added. when you have a great idea for an app, you and a friend can create it, get it started, put it into the app store, and raise a bunch of money like this kid that just e-mailed me today did, and that's what makes it seem like, hey, i could do this on my own. just send me $50,000. that's the difference today, like, oh there's all this upside and you can be part of it for 5 or 10 or 15 or $25,000.
but more often than not, that money, you're just throwing it away. >> last night, twirgt just unveiled their angel hashtag last night to do a kick starter on twitter, which was very interesting. but i think part of the problem is, we see shark tank on 24/7 right? and everybody wants to be the next guy on shark tank. so what's to prevent them from looking into something that their expertise lies in and investing in it? i don't see where that is so terrible? if you can be on shark tank 24/7, and you're basically doing the same thing they're doing. so it's kind of encouraging people to do this type of investing. >> and i would tell you, yes, we're encouraging people to go for it we're encouraging people to start companies, whether it's an app or otherwise, but you also hear us say all the time that you know, sales matter. i say it all the time.
having a product is not enough. there's got to be a way to create a return. i also say that you know, if you go into your business with an exit strategy you're doing it wrong. you've got to have a goal other than an exit strategy. and the investments we tend to make in "shark tank" are defined by the returns. and we see these deals all day long, every day. and that's -- hopefully, we teach people, you know that turbid be careful and you should pay attention to the numbers. but still -- >> right -- >> i think part of the problem is that the individual investor is being shut out of the ubers and all these companies that are going in -- so now they're looking for something else and you're going to go down to the least common denominator, which is now pre-shark tank type companies where a guy has an idea and puts it up on crowd
funder or whatever and -- but they're raising serious cash. >> which is also the american dream. >> sharon, quick word? >> i just want to know -- mark? >> huh? >> mark, it's sharon. what are the key things people need to do? do they need to look for the number of users, the size of thent to do if they want to put in the $5,000, put in more money, do five different ones at the same time and hope one hits what are some of the key things you tell people to do to make sure? >> very very very simple, shaurn sharon, it's a great question. the question you have to ask is how do i get my money back. and the answer to that question is when we sell the company, do not do it. >> say that one more time mark? >> the question every investor whether you're putting in a dollar or $1 million or more the question to ask is how do you get your money back? if the answer to that is when we sell the company -- don't
make the investment. so simple. >> mark, before we let you go i want to hit on a couple of quick things. one being, this is very important, what you've talked about in terms of colleges unsustainable debt problems et cetera, sweetbriar college closing down in virginia. do you think this is the first of many more dominos to fall on the college front today? >> no question, no yesquestion. look, i said it before and i've been saying it for years that the tuition -- inflation and tuition is very analogous to what we saw in the real estate bubble. you have easy money. anybody can get a pell grant, anybody can borrow money. you've got easy follow-up money where, basically, parents, uncles relatives can borrow even more. because it's so easy to borrow money, there's always going to be money for tuition. the more -- and historically, over the last 20-some years, at colleges have raised tuition, people have just gone out and borrowed more money.
that's got to stop. that is another bubble right? and the way to stop that is a, people are going to get smarter about where they spend their money, as we hear more and more war stories about people getting saddled with student loans. and when they start doing that you will get more examples and b -- let me say that. when people get smarter, we're going to see more discriminate investing in college education. they're going to go to less expensive schools. that's going to lower the number of enrollment. and then b, also we'll see caps on the amount of money any family can borrow through co-signing, so that also sets a limit. as that happens more and more you'll start to see declining enrollment. that is horrible for colleges. when a college -- a college has $40,000 annual tuition. if there's a decline of 1,000 students, that's $40 million. >> right. >> right.
>> that's $40 million! that's a lot of money. and so that's going to lead to a cascading problem. and right now, they're making it up by increasing financial aid to try to balance it out. so they're lowering -- they're lowering their tuition, their effective tuition, on an ongoing basis. but at some point, something's got to give. >> and sure and in sweetbriar's case, it sounds like they couldn't come up with more benefits or tuition or grants to cover the tuition costs, i should say. listen, we've got to let it go and let you go. i just have to know did you pick ann coulter for your vice president or how did that all work here for the upcoming "sharknado"? >> it was a blast. she was awesome, but the dinner table conversations were amazing. >> i bet they were. >> it was fun. doing that show doing that movie was amazing. i got to shoot rifles, throw grenades, you know battle sharks. it was a blast. >> thank you so much for being here. speaking of battling sharks,
mark cuban weighing in on the college debt bubble on the dotcom bubble. there's much more to read on his blog and we thank you for joining us this afternoon. appreciate it mark. >> my pleasure guys. thank you. >> have a good one! don't know what that cheer was for. coming up here, we'll have more reaction to mark cuban, but we're going to have some first here morgan brennan, joining us with a quick market flash. hi morgan. >> hi kelly. check out shares of gap. those are falling in the after-hours trade. the retailer releasing comp store sales numbers coming in down 4%. the street was looking for sales to be up 2% so a big miss there. the one, i guess, relative bright spot, if you will diving into those numbers, looks like old navy which is owned by gap saw flat comp store sales, both old navy and banana republic saw declines. gap's cfo saying they are focusing oen the spring shopping months. that stock is down more than 2% right now in the after-hours. back over to you. >> all right. thank you, morgan. as we just heard mark cuban talking about why the tech bubble today is worse than it was in 2000. up next, we'll hear from one
so-called angel investor who says cuban couldn't be more wrong. and we're minutes away from the fed's bank stress test results. which banks made the grade and which ones failed. we'll have the full team coverage the second the results are out. stay with us here on cnbc, first in business worldwide. e we come from. um, there are definitely things that are different about us culturally and everything else but at the end of the day we are the same and we really need to start seeing the world as a place that was gifted to us. [thunder and rain] [thunder and rain] [thunder and rain] woman: it's been a journey to get where i am. and i didn't get here alone. there were people who listened along the way. people who gave me options. kept me on track. and through it all my retirement never got left behind. so today, i'm prepared for anything
welcome back. moments ago, billionaire investor, mark cuban defending his blog post on why this tech bubble was worse than the one we had 15 years ago. he said angel investors are looking for a big score and they may be facing a big disappointment, instead. >> crowd funding is going to create the perspective that it's even worse, because now, you can invest as little as $5,000. so you know you might be thinking you know instead of getting my car fixed, i'm going to put my $5,000 in and i'm going to hit a home run. the next thing you know, there's no liquidity and you can't fix your car when it brakes. >> let's get reaction now from someone who says that cuban is about -- or who cuban says is about take a bath. one of these angel investors. steve brotman and he joins us on the line right now. steve, thank you so much. we're also joined by "fast money's"guy adami and our our panel steve, first to you, mark has
laid out his concerns about angel investors and likening this period to 2000 day traders. what say you? >> yes, i mean i think at least at this time i love mark and he's a great promoter of investing in american businesses and probably the biggest promoter that our country has. i think, however, there's a little bit of overexaggeration here. if you look at the u.s. stock market, it's 522 trill. there's $18 trillion of u.s. debt. so the $20 billion or $30 billion of angel capital invested every year is a drop in the bucket. so when someone yells bubble they're really talking about, at least from my perspective, is an
investor but also an economist. structural damage to the economy, because of these activities. and these -- the attempt the 1%. even if all of the angel investments are wiped out -- and these are mostly high net worth individuals, i would say 90 -- and even with crowd funding, it's a huge percentage of folks who are very wealthy. the impact on the average is going to be nominal. so, it's great -- i mean i'm glad he's pointing out the dangers of angel investing, because he's -- to call it a bubble, you're yelling fire in a crowded theater. >> let me bring guy adami. mark himself made this point. he said, it's going to be worse for the investors that he's concerned about than it will be for the overall economy. your response, guy? >> i think he's 100% -- steve makes great points and he has numbers to back up his points which is fantastic. and mark was quick to point out that he didn't think it was
going to do any structural damage to the stock market and/or the economy. i think mark was just pointing out that hey, folks, before you rush in and give your $5,000 out to some of these things try to have an understanding as to what you're getting into in the first place. so maybe bubble's the wrong word. i'm not certain if -- i'm sure he meant to use the word. maybe it's not the right word. but i just think he was painting a cautionary tale and it makes a lot of sense. on the other side of that equation, i think steve brings um some wonderful points. >> mike? >> well, steve, this is mike san toldly. i wonder if you take it on the limited basis, sort of not saying, this is some sort of stm systemic risk this isn't an economy endangering kind of financial bubble but just the idea that this whole sector of start-ups is kind of played out and it's no longer kind of smart money, doing smart things for the opportunities and a tlibt feeding around the edges and can we actually speak to that limited point? >> i'm not exactly clear what your question was, which is you
know, with -- yes, we have lots of smart money around these opportunities. but, you know, i think that if anything, the average investor the average mutual fund the average -- and i'm out there talking to lots of investors, on average, people are underinvested in small businesses generally. if you think about that half of all u.s. gdp growth half is from population growth and half is from innovation the 0.1 or 0.2% of all our investing assets are invested in these small opportunities that really create that growth in the future. it's pitiful. so i would argue that if anything it's underinvestment. >> on underinvestment. >> yes. >> john quickly? >> i would say the average family on my block does not have you know -- on almost anyone's block has virtually no investments in small businesses. i mean, i think, you know, i live in that world, mark lives in that world, where it's 24/7. but you talk to the average joe
and, you know, they don't know what crowd funding is. >> i think one last point is the fact that credit is very tight. ben bernanke can't refinance his mortgage, right? who is going to give money to these guys except high net worth individuals who have some expertise in the field that they're looking to invest in and that's who's getting the money. >> is there a concern that now it's becoming just, if nester doesn't have that 5ka to spare, doing too much crowd funding and too much angel investing? >> i think the opportunities are there. there are opportunities out there. it does not have to be the individual investor, with $5,000, that does not understand what they're investing in. there are other opportunities. >> got to leave it right there. >> real quick. >> real quick, you know the average amount spent gambling year in the u.s. is $30 billion or $40 billion a year if not more. >> yeah. >> that's for more than this type of investing style.
if we're worried about people blowing their money, you know, camp out in las vegas. >> yeah, that's a point. an important one, steve. thank you for being here. steve brotman of alpha venture partners, a founder. guy acomedamadami, thanks to you this hour. much more coming up with guy at 5:00. the northeast still in the grip of another brutal winter. are retailers taking a hit because of it? that's next. and should the unemployed be able to tap into their 401(k) funds early without having to pay that 10% penalty? president obama thinks so but is it a good idea or a risk to your retirement? that's coming up on the "closing bell."
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welcome back. major retailers reporting their same-store sales results for february. and courtney reagan keeping a close eye on the numbers for us watching to see if weather is a factor here. >> not as much as you might think. february is one of the least significant months of the year for holiday clearance has waned, spring merchandise has begun to line the shelves, but way before we're ready to slip on sandals. look at the weather today here in new york. gap february comps down 4%. gap and banana republic down 5 and 7% respectively. old navy has been strong. this month it came in flat. elle brands turning in the strongest result of the group. 6% increase in february comps. that's more than a percent better than the street expected. the strength comes from victoria's secret where we had valentine's day. comps up 7%. also, that swimwear push punk
waited by the first ever swimsuit tv special. maybe some folks are ready to buy those swimsuits. costco reporting full earnings beating the street by a wide margin on the bottom line. although a lot of that was thanks to robust gasoline margins. total february same-store sales up 1%. up 8 wkt without the negative currency in gas price impact. so actually a pretty strong month there for both costco and elle brands. >> courtney thank you so much. and a preview, perhaps, of what we might hear tomorrow morning on the jobs front. let's get to sue herrera with a news update. >> here's what's happening this hour. iran's foreign minister started a new round of nuclear talks with representatives from six world powers. this comes after he spent the past three days holding talks with secretary of state john kerry. the attorney representing the family of michael brown, the teen killed by a ferguson police officer, announcing that the family will be filing a civil suit. he said the browns do not accept that officer darren wilson acted in self-defense. student protesters blocking all entrances to the university
of california at santa cruz as part of an ongoing demonstration against tuition hikes and police violence. as a result the university issued an online alert, telling people not to come to campus today. and roman catholic cardinal edward egan the archbishop of new york has died they was 82. he was the archbishop during the 2001 terror attacks, in which he anointed the dead at a lower manhattan hospital. cardinal egan was 82. and that's your cnbc news update this hour. "closing bell" is back in a moment. ♪ at mfs, we believe in the power of active management. every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. which leads to better decisions for our clients. it's a uniquely collaborative approach you won't find anywhere else. put our global active management expertise to work for you. mfs. there is no expertise without collaboration.
welcome back and here we go. the bank stress test results are in. kayla tausche joins us now with the results. >> the federal reserve finding all 31 global bank holding companies undergoing this year's stress tests did have enough capital on hand to weather a depression-like environment without needing money from taxpayers. now, that hypothetical environment included unemployment at 10% the dow below 9,000, real gdp that contracted as much as 6.1%. and of course, these snare knows change each year with fed officials trying to simulate events that they call plausible, but unlikely. this year's test did include an
element where default rates for corporate debt shot up widening spreads, impacting volatility and impacting equity prices as well. that placed some new strains on banks with more exposure to capital markets, like the big bulge bracket banks. bank of america, citigroup, jpmorgan morgan stanley, but those are still above the fed's minimum tier one common equity ratio, which was i believe, 4.3% as well as the fed's total risk-based capital minimum. just yesterday, though a research arm of the treasury department criticized the fed's stress test as what they called predictable. of course, results where every single bank would appear to pass the fed's stress test would lead to more critics saying the same thing. but fed officials responded this afternoon saying the arguments did have merits but that it's impossible to carry out every single hypothetical scenario in a single test. and of course kelly, the outcome of the stress test could
still change next week when banks add their proposed dividends, buybacks and overall capital returns to the mix. those tests will be out next wednesday and that is really what shareholders are watching for, kelly, because that will determine what shareholders can get, what the fed will actually approve banks to give back to their investors. back to you. >> kayla, thank you. and please stick with us as we bring the panel in with two analysts who focus on financials for their reaction. jack moore is research director for jim cramer's charitable trust at the street. jeff harden is a principal at sandler o'neil. welcome to you both. jeff, what do you do with these results here? >> i think you can say that the stress test gets a little less stressful every year especially for the market. and we got the easy test. there's no buyback included. you don't try to raise your dividends. everyone passed that should have passed. the real challenge will come next week when you have to start incorporating hopefully higher dividends and hopefully higher buybacks. that, i think, has the potential to get a little hairier when we gets the results next wednesday.
jack, what about you? any names here? i'm looking through the tier one capital numbers. goldman towards the bottom end. >> that was a little bit surprising to me. bank of america actually looked pretty impressive relative to how it's performance last year. but i think the most important thing, you have to go 31 for 31 here. there's no reason to miss it especially if it's not your first time, because i think zion missed last year. >> and they're also at the bottom of the barrel on the tier one capital number under these scenarios. >> right. which makes sense, up at least 5%, but they've been doing this since 2011. each year it gets a lot easier a lot more predictable for them. for our own sake we own morgan stanley, jim and i, in the charitable trust, and next week matters. that's all everyone's looking at. and that's the biggest catalyst we've put it on. i think you've got to just take this one data point with a grain of salt. but a lot is riding on next week. >> reaction here, sharon? >> you're looking at the higher dividends, looking at the buybacks, what are some of the things you'll be watching for next week that are going to be pivotal to whether or not you're still interested in the
companies that you mentioned? >> it's a great question. going to be looking at what they ask for, what they want to actually have their payout ratio to be and how much they want to pay in dividends and buybacks. obviously, everyone's a lot more comfortable with buybacks because you can pull those immediately and very quickly, very flexible. but it's what they ask for and what they approve. >> kayla, it was interesting, as you mentioned, the stress test results are supposed to lay out scenarios that are plausible, but unlikely. there are two in particular that caught my eye. one was brent crude at $110 a barrel, but quite clearly, we've gone the other direction. the other was the dollar euro at $1.21 when today we're at $1.10. how relevant are these stress tests? >> that was a question when the scenarios were laid out in october and pretty soon after that, we got the precipitous decline in the oil market. we saw the euro moving more and more towards parody with the dollar. it's an imperative question. but fed officials would say, look, we're not in the game of predicting where the global economy will go. and in fact maybe it is less of
a good exercise for the banks, if you're trying to test where things are right now, because that's what they're going through right now. potentially, it would be even more stressful if brent took a right turn back toward 110 right now. how would they have changed their books and resides some of their commitments? i think the fed officials would argue that in fact they are in the business of trying to predict things that are unlikely and unpredictable, rather than things that are actually happening here and now in the economy. >> i hate to oversimplify as well, but when you get to what oil's going to be, it's a bit of a nuance. the real driver is how bad is the recession? what kind of gdp contraction do you get? how high does unemployment get? >> also kelly, this new -- >> kayla, go ahead. >> this new test on the capital markets, where the fed is expecting or stressing bank balance sheets in expectation of
potentially higher corporate default rates. that in and of itself, is one of the by-products of low oil prices, if it does start to actually affect the cash flow of some of the companies and the energy patch that these banks are lending to and trading assets for. so you could argue that even though they're not necessarily stress testing for oil prices at the lower level, they are testing for some by-product of that to happen in any sector. >> a word john? >> i think right now, citibank is trading a little bit higher so i guess corbin keeps his job. the other thing is going back to the corporate bonds, i think we saw the minutes come out yesterday on dudley. most that he sent out were about the corporate yield spreads, right, corporate cds, et cetera. i think that now, with the cqe, this corporate qe going on we're seeing $300 billion, $90 billion, huge amounts of doerpt activity, because these guys are searching for yields. >> how is that relevant to the banks? >> it's very relevant. that's the biggest stressor that's going to come forward.
if there's a blow-up. it's going to be these corporate bonds blowing up. >> and in the meantime, jack when we talk about -- how many investors are on the sidelines waiting for banks to finally start paying more dividends or doing more buybacks? >> i think it's some of these banks where the growth isn't there that we saw before where the investment banking business is so volatile and that's become a discount. that's rights a lot more. it has to be coming into a capital allocation story. and that's a lot ride on morgan stanley. but also on wells fargo, and the reeglators love them. it's always this bifurcation, where you have like the loved ones, like wells fargo, and the hated ones like citigroup and bank of america. and bank of america just cheated o on a test last year. they had to restate their accounting. i think there is a laser focus scrutiny on a few of these, and i think a little bit more understanding with the other ones. >> fob, friends of buffett. >> oh, my goodness. do you think this will be the time when finally banks start to resume more capital return or is it going to remain because of the issues you mentioned, whether the fines, the legal settlements, just the clouds hanging over the industry
concerns about their long-term profitability and competitiveness, will day be able to pursue in large scale some of these programs people have been anticipating now for years? >> well there's a difference between what they want to do and what they can do. and i think that's why you're seeing a lot of these banks, they care a lot more about pacifying the feds than actually trying to ramp the programs up or ramp the capital allocation because they know they can't get two ahead of themselves. so i think it will be a few years before we start seeing some real meaningful higher payout ratios. >> a last word? >> you mentioned the stress tests are less stressful, but the fact they have to play defense on some level every single year has changed this industry and how it thinks about itself. they've already written off the old r.o.e. targets and things like that. what does that mean for an investor in the group? >> and that's what i think is really weighing on some of the real large cap banks, isn't so much that people are comfortable with maybe the bank itself but if you just don't know what's going to come next. there's still a lot of uncertainty on the regulatory front. i mean go back 15 years ago, if a bank had a 5% tangible common
equity ratio, you thought they were well capitalized. most of these big banks are double that and going higher now. so, things have certainly changed a lot. i do think we're going to see payout ratios kind of creep up but they're going to creep up at the fed's pace not the bank's pace. but at the current fed pace people are worried about jpmorgan having to get a tier one common ratio up to 12%. the way things are going right now, they're going to be there in a year and a half whether we like it or not. it's going to become -- they'll have to start ramping up both buybacks and dividends, or we're going to be talking about 15 16% ratios. the capital levels are building really quickly. >> this is fascinating. we'll leave it there for now. thank you. kayla, we'll see you again after the break. up next more reaction and analysis to these stress tests and also a new plan allowing the unemployed to take money out of their 401(k)s without a penalty has been proposed, but not everyone thinks this is a good idea. that story, ahead.
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we're back to dissecting the results of the bank's stress tests. what this means for the sector as far as next steps, let's bring in marty mosby, director of banks and executive strategies along with our panel and kayla tausche covering these results for us. let's just begin, name by name if you don't mind marty, talking about any surprises you see here. >> well like you were talking about, all 31 banks passed so
there weren't a lot of expected surprises in this release today. the banks have been building capital enough that they can cover these stress losses and still have some room to begin to deploy the capital they're building up each year. we do expect the total payouts to continue to increase. after last year it went from 50% to 68%. after the announcements next week, we think we'll be up to an 80% payout ratio for the large cap banks. >> and jeff hart just told us he thinks some of these names like jpmorgan could be headed well into double digit territory on their capital levels before too long here. is that your expectation as well? and what's that's going to mean for the banks? >> well we're looking at a couple things here. one, regulatory capital ratios are what everybody's looking at here. and we will see those move into double-digit levels. we don't expect the tangible common equity the tangible assets to get to that level, because you can look at the risk-weighted assets and how you model them what you're looking at are some very sophisticated calculations, that gives you a
little bit more room on the regulatory than it would on the return capital tangible common equity. >> sharon? >> i have a question about deutsche bank trust in particular, as a new addition to this list. is there anything that one should be looking out for as we go into next week for them to report with the next level of the stress tests? >> well with the european banks, this is their kind of movement into this new process. really, what we're looking at here is now the u.s. banks, having to focus on the capital deployment. the european banks don't really at this point, get affected by that next level. so the sense that they got passed and were able to pass on the stress tests, was the biggest, you know, issue they were trying to cover in this first round of review. >> kayla, do you want to respond to that? >> deutsche bank had some interesting results in this round of the test sharon. it would look if you look at the face of the capital levels across the board for deutsche bank that they are extremely high, far higher than any of their peers.
but senior fed officials actually told reporters that only about 15% of deutsche bank's u.s. operations were subject to the stress tests, so it's benefiting from the capital at the holding company level, is my understanding, but such a small portion of the u.s. operations are being tested. that could change but that is actually making it appear that deutsche bank has multiples of the capital of its peers. and that will change over time. >> mike? >> marty, i wonder if we look ahead to the next phase of these stress tests and the more qualitative evaluation do we really expect there to be -- to the extent you can expect surprises -- but is there really a wide range of potential outcomes when it comes to that phase? >> reporter: well, there always is. it's a posturing, when you get to the next phase. the qualitative side is really much more about how the bank managers are interacting with the regulators. the regulators want to make sure to the bank managements, like y'all, kind of postured earlier
and are remaining conservative in their deployment and ask. if they ask for too much that's a qualitative failure. it depends on how much they've kind of put into their plans. when we're looking at the quantitative side, there's still plenty of room to see some improvement in the giveback of capital shareholders over the next year. >> and kayla, any comments from the banks before we go here in the last couple of minutes? >> you know we haven't gotten comments from the banks themselves. of course, the real meat of the news for their shareholders will come next wednesday, when it will remain to be seen whether their capital plans have been approved. that's really going to be the money result there. but we are seeing some of the shares move up particularly for bank of america in the after-hours, because they had a miscalculation that they had to retroactively scrap a buyback last year. a lot of analysts on the street were worried that that would negatively impact them going into at least this first part of the test because it didn't and because their results actually looked fairly good that's of course, going to move that stock to the upside. >> and names to watch into
tomorrow's session, as well. leave it there, kayla. thank you so much. marty mosby, our appreciation this afternoon as well on those stress test results. >> so a money mistake or a lifeline? that's how some money experts are looking at a proposal by the president to allow the unemployed to tap into their 401(k) plans without paying the 10% penalty. sharon epperson here with our panel taking both sides of this story, next. 'm type e. i know what my money is doing. i rebalanced my portfolio on my phone. you know what else i can do on my phone? place trades get free real time quotes and teleport myself to aruba. i wish.
welcome back. we have a news alert on a hedge fund titan. our kate kelly has the details. hi, kate. >> hey thanks so much kelly. the tiger consumer management fund company, which manages both a flagship version in the u.s. and offshore version, is winding down according to a letter from founder patrick mccormack himself, once a tiger cub. fund manages an estimated $4.1 billion and according to the letter were up 3.9% so far this year. some major holdings include carmex, facebook and netflix. he says essentially he wants to spend more time with his family
kelly. he said running a hedge fund is rewarding work but very demanding. for now, that's all we know in terms of his motivation. it's a sizable fund to be shutting its doors. >> it is. kate, thank you for update this hour. kate kelly back at headquarters. meanwhile, there's bipartisan support for a white house plan to allow unemployed workers to draw from 401(k)s without being chakwhacked be the 10% before taking it before age 60. >> you'll be able to do this if you've been unemployed 26 weeks or more and receiving unemployment compensation over the time. you're able to then take money from your i.r.a. or 41 k up to $10,000 or perhaps up to $50,000 depending how much money you have in those accounts. you can take 50% of that money that is in the account. so if you have $30,000 in an i.r.a. and have lost your job, and you're undergoing a hardship and need a withdrawal, you can take up to $15,000 out of the i.r.a. or 401(k). here's the rub, though. you know, you're taking that
money out at a time that you're trying to develop long-term growth and that is something that you're not going to be able to build up very quickly so a lot of experts say while this is a good thing in the obama proposal a lot of people who have gone through this and tried in the courts to get this hardship withdrawn and get a little bit of relief have not been able to. the downside is it's going to take a long time to build up the money once they take the money out of their retirement funds. >> do you think the rules should be relaxed. >> it makes sense to me. it's not a revenue give-up. within the spirit of the tax-deferred provision basically you're not doing it just to kind of set money aside for when you want it. you have to show you're eligible for it. what would the alternative be for many people? going into debt likely. >> is it better to go into debt in some extent if you can get in another source than take money out of a 401 k that might be able to make up over time? >> credit's tight. nobody is going it give you credit when you're on unemployment insurance. there's no place to go except your 401(k).
not only do i think they shouldn't pay the 10% penalty, i think in terms of hardship they should pay a reduced rate in terms of overall taxation when they take the money out. their income, right, whatever the lowest income bracket is, that's what they should pay on that money. i think it's twofold. really there's no liquidity. when you're out of a job -- >> most people have already tapped everything. you make a very good point. i mean taking money out of your 401(k) your i.r.a. should be the last resort, but a lot of people are at that point, at the last resort. the reason why they've gone to the court system and said hey, can i get this money and not pay the penalty is because they're at that point and now this is going to give them relief. >> i bet the majority of unemployed people as o pool don't even have significant savings in an i.r.a. or 401(k). in the way, they're the lucky ones. >> unemployed or employed many people don't have -- >> exactly. >> what were you going to say over there? >> i was going to say when they go to take the money out, let's say there's no hardship, people are saying now when you're 65
years old, who knows what the taxes are going to be on your 401(k). not going to be 30%. maybe if the deficit goes up to the trillions of dollars -- could be 6 a%, 70%. they're looking to get at that money one way or another. that's a totally different story. what's the sense of taking it out, right? >> got to go. more online. sharon, thank you. the elephant in the room. coming up, ringling brothers and barnum & bailey circus announcing elephants are being phased out. more on that when we come back. there's nothing more romantic than a spontaneous moment. so why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either.
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elephants for a long time for the logo for ringling brothers and barnum & bailey circus. elephants will be phased out by 2018 because of concern of how elephants are treated. thai live on a 20 acre center for elephant conservation in florida. who here has been to the circus? what do you think about this is? >> i love the circus. vy a 9-year-old and 12-year-old. i love to go. i thuns understand this is a global company and think about what
people think in terms of the endangerment of the animals, the way they're treated. the entertainment, it's not about the circus. they have disney on ice, monster jam, truck show, marvel live action show. they have a lot of other properties that efshif people aren't going to the circus, they're providing family entertainment. >> i remember the seaworld documentary where seaworld had to reconsider some of its own acts. why elephants might get -- >> it's got to become clear to them that that customers pushed back on it. obviously there's enough unease out there. i don't know if they hear it directly or gotten bad press somewhere. it's not just about this company or seaworld. it's a generational thing, kids and their parents aren't as comfortable. >> my kids love the clowns acrobats and the animal part they look at it -- >> are clowns the next they're going to be phased out? >> they look at how the animals are treated. children have pets. they're concerned about it. >> tigers and elephants i think treated worse than the elephant elephants. that's my o pin whereon.
>> elephants have a melancholy way -- >> throw the peanuts to them. >> let's circle back real quick talk about markets. we have just ourhours to go before the big job reports tomorrow morning hits at 8:30. do you think weather affects this at all, the lockup data dissemination? >> i don't about the dissemination. the weather is going to be a factor in the interpretation of the data. plus the port strike. seems like people are willing to kind of give this number a little bit of latitude before they overinterpret it. yeah, we have to worry about the weather in d.c. for sure. >> last word, john what are you watching tomorrow for the markets? >> i think obviously unemployment report is big. initial claims ticking back over 300,000. a little unsettling. you know, labor this morning was unsettling. the fact that hours worked was down compensation up. that's a little bit of a red flag. going forward, i think, you know, hey, pedal to the metal. india, china, japan, bank of you know -- >> central bank. >> banks everywhere. >> sharon? >> don't forget about stress tests. stress test your own portfolio.
we spent a lot of time art the banks and what to look. for investors need to look at how much risk they can take, what happens to their unemployment? housing prices going down. if that happens, how are you prepared? >> if you need a break, there's always a circus. that does it for us on "closing bell." "fast money" begins right now. live from the nasdaq market site overlooking a very show we times square in new york city i'm melissa lee. this is "fast money." traders tonight, tim seymour, brian kelly, karen, and guy adami. soaring 15% on strong guidance and plans for yieldco. we have the cfo in an exclusive. plus tech bubble 2.0. mark cuban making comments on liquidity in the market. comments you need to hear and the trade ahead. first breaking news on the latest round of the u.s. bank stress test. kayla has more back at hours. kayla? >> reporter: hey, nellis is a. for the first time sense the stress tests were introduced by the federal reserve